2 min read
Definition
Off-balance-sheet finance refers to funding that does not appear as a liability on the balance sheet — historically some operating leases, joint ventures or factoring structures. Modern standards bring much of it back on-sheet.
In plain terms
It can make a business look less indebted than it really is. Savvy lenders and investors always ask "what is off the balance sheet?"
Why it matters for your company
Disclose off-balance-sheet commitments honestly — contingent liabilities and lease obligations included. Hidden leverage discovered later destroys lender trust. See gearing.
Related reading
Operating lease
An operating lease is essentially renting — you use the asset for part of its life, the lessor keeps the…
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Contingent liability
A contingent liability is a possible future obligation that hinges on an uncertain event — a lawsuit, a…
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Gearing
Gearing is the ratio of a business's debt to its equity, showing how much of its funding comes from borrowing…
Read →Net debt
Net debt is total borrowings minus cash — the debt figure that actually matters, because £1m of loans against…
Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.